News of Note
CRA publishes the December 2025 CTF Roundtable
Email this ContentThe Rulings Directorate has published the official version of the December 2, 2025 CTF Roundtable. For your convenience, the table below links to the 14 questions and our summaries of them (which we published in December, with the exception of Q.12, which was first released this week).
Ngoy – Quebec Court of Appeal allows a tax appeal on the basis of inadequate reasons
The taxpayers' appeal was allowed, and the matter was referred back to the Court of Quebec for a fresh adjudication, given that, in the appealed decision, the judge had not addressed the issue before her in her reasons for judgment (namely, whether the ARQ was justified in using the indirect cash flow method to arrive at its assessments of the taxpayer) otherwise than to quote the ARQ pleadings at length.
Neal Armstrong. Summary of Ngoy v. Agence du revenu du Québec, 2026 QCCA 193 under Federal Courts Act, s. 27(1.3).
CRA confirms that an excepted trust listed in s. 150(1.2) is not subject to Sched. 15 reporting even if it is not an express trust
CRA confirmed that the exceptions to the required Sched. 15 reporting in proposed Reg. 204.2(1), provided for in proposed ss. 150(1.2)(a) to (r), are not restricted to trusts described in the preamble to s. 150(1.2), i.e., (outside Quebec) express trusts – so that such exceptions to the Sched 15 filing requirement apply to any trust which has a filing obligation pursuant to s. 150(1)(c) regardless of whether or not it is resident in Canada and an express trust.
The point of statutory interpretation is that where one provision (Reg. 204.2(1)) assimilates by reference parts of another provision (the listing of excepted trusts in ss. 150(1.2)(a) to (r)) which can be read on a standalone basis, it is not impliedly assimilating the balance of that other provision (e.g., the express trust limitation in the s. 150(1.2) preamble).
Neal Armstrong. Summary of 2 December 2025 CTF Roundtable Q.12, 2025-1080801C6 under Reg. 204.2(1).
Income Tax Severed Letters 25 February 2026
This morning's release of 14 severed letters from the Income Tax Rulings Directorate is now available for your viewing.
CRA indicates that interest capitalized to building inventory is not IFE under the EIFEL rules
CRA referred to Oryx, Shofar and Easter Law Trust for the proposition that “the cost of inventory is not considered to be a deductible expense in computing a taxpayer’s income in the year in which the inventory is sold”. On this basis, it concluded that where interest expense was capitalized to the cost of inventory under s. 18(3.1)(b), it would not be included under A(a) of the "interest and financing expenses" (IFE) definition in s. 18.2(1), even though it would effectively be deducted as part of the cost of goods sold on the sale of the inventory.
A(a)(ii) requires that the interest be deductible in the year in which it was incurred. Thus, the same result would be achieved on a plain reading to the extent the interest was capitalized in a year prior to the sale. However, the above CRA approach indicates that the interest also would not be included in IFE even to the extent that it was capitalized in the year of the sale.
Neal Armstrong. Summary of 5 November 2025 External T.I. 2025-1066661E5 under s. 18.2(1) – IFE – A(a).
We have translated 7 more CRA interpretations
We have translated a CRA interpretation issued last weeks and 6 CRA interpretations released in October and September of 1999. Their descriptors and links appear below.
These are additions to our set of 3,491 full-text translations of French-language Technical Interpretation and Roundtable items (plus some ruling letters) of the Income Tax Rulings Directorate, which covers all of the last 26 years of releases of such items by the Directorate. These translations are subject to our paywall (applicable after the 5th of each month).
Suncor Energy – Federal Court of Appeal finds that, to effect the s. 13(31) continuity rule, the transferee of depreciable property is deemed to have taxation years before its formation
In approximate terms, s. 13(27)(b) deems the available-for-use rules to be satisfied once two actual taxation year ends have passed following the acquisition of the depreciable property. In this regard, s. 13(31)(a) deems a property acquired in a non-arm's length transfer to have been acquired when it was acquired by the transferor.
The Crown effectively asserted that the s. 13(31) continuity rule did not work where the transferee had been newly formed, as it did not have any taxation years that could be counted from the time of the original acquisition of the depreciable property by the transferor to the time of formation of the transferee. In rejecting that position, Webb J.A. stated that “[i]t is a necessary implication of the deemed acquisition of property at a particular time [pursuant to s. 13(31)] that such time must occur during a taxation year” and that “[o]therwise, the time period in paragraph 13(27)(b) would never commence” so that “the purpose of subsection 13(31) of the Act [, which] is to provide for continuity of ownership between non-arm’s-length parties when applying the rule in paragraph 13(27)(b)” would not be met.
Support for this proposition included that the s. 13(31) rule, by virtue of s. 13(31)(b), extended to depreciable properties transferred on a butterfly, for which the transferee corporations are typically Newcos - which contradicted the Crown's view that Newcos could not benefit under the s.13(27)(b) rule by reference to the time of the depreciable property’s acquisition by the non-arm's length transferor.
Neal Armstrong. Summaries of Suncor Energy Inc. v. Canada, 2026 FCA 33 under s. 13(31) and Statutory Interpretation – Interpretation provisions.
DAC Investment – Federal Court of Appeal finds that it was an abuse of s. 250(5.1) and of ss. 123.3 and 123.4 for a CCPC to continue to BVI before realizing a capital gain
With a view to its imminent disposition of the shares of a subsidiary, the taxpayer continued to the British Virgin Islands. As a result, it ceased to be a Canadian-controlled private corporation (CCPC) and became a private corporation that was not a CCPC, with its central management and control remaining in Ontario.
In reversing the Tax Court, Woods, J.A., confirmed CRA's reassessment made on the basis that the resulting non-application of the imposition of refundable tax under s. 123.3, and of accessing the rate reduction under s. 123.4, on the taxable capital gain on the sale was an abuse of those provisions and of the continuance rule in s. 250(5.1).
In particular, the continuance rule was intended to make “tax provisions fairer for corporations moving into or leaving Canada by way of continuance” (para. 72), whereas, here, the continuance had an “inconsequential” business effect (para. 73) and served mostly to abuse an “anti-deferral” rationale of ss. 123.3 and 123.4, namely, ensuring that “investment income should be taxed the same whether it is received directly or through a private corporation” (para. 46).
Woods J.A. also rejected a submission by the taxpayer that it was reasonable to apply s. 245(2) on the basis that the reassessment period for the taxpayers should be the normal reassessment period for a CCPC, i.e., three years rather than four, so that the reassessment at issue was statute-barred. She indicated that the legislative history of the GAAR rule demonstrated that it had been narrowed to only deny tax benefits that resulted from the avoidance transactions, rather than to produce any other results that might be considered reasonable in the circumstances.
Neal Armstrong. Summary of Canada v. DAC Investment Holdings Inc., 2026 FCA 35 under s. 245(4).
CRA finds that a corporation is not affiliated with itself for purposes of the EIFEL – excluded interest rules
A Co and its wholly owned subsidiary, B Co (both taxable Canadian corporations) were the only partners of a partnership. A Co owed interest to the partnership.
Whether the interest qualified as "excluded interest" (e.g., so as to be excluded from the interest and financing expenses of A Co for EIFEL purposes if so elected) turned on the requirement under s. (d)(ii)(A) of the definition thereof that each member of the partnership be an "eligible group entity" in respect of A Co. Since B Co clearly was affiliated with A Co, this turned on whether the taxpayer (A Co) was affiliated with the other member of the partnership (A Co), i.e., on whether A Co was affiliated with itself.
In rejecting this proposition (so that it did not consider the interest to be excluded interest), CRA stated:
Subsection 251.1(1) delineates the meaning of “affiliated persons” or “persons affiliated with each other”, for the purposes of the Act. It does not deem a corporation to be affiliated with itself. For the purpose of applying section 251.1, to establish whether two different entities or persons are affiliated, paragraph 251.1(4)(a) states that “persons are affiliated with themselves”. There is no specific rule deeming a corporation to be affiliated with itself, for the purpose of the “excluded interest” election. Therefore [s. (d)(ii)(A)] would not be satisfied.
In reaching this conclusion, we kept in mind the main rationale of the “excluded interest” election, namely the facilitation of typical loss consolidation transactions [as per the Explanatory Notes].
The contrary view could also be argued: Nowhere in s. 251.1 does it state that affiliated persons must be “two different entities” and s. 251.1(4)(a) states the opposite. S. 251.1(4)(a) deems a person to be affiliated with itself for the purposes of s. 251.1, which constitutes a comprehensive code for determining whether persons are affiliated. Therefore, a person may generally be affiliated with itself, including under the EIFEL rules. Furthermore, the statement by the CRA that the “main” rationale of the excluded interest election is to deal with typical loss consolidation transactions acknowledges that there are other uses of the excluded interest election. (For a harder case that nonetheless resulted in an expansive application of a deeming provision, see Canada v. Olsen, 2002 FCA 3.)
Neal Armstrong. Summary of 18 November 2025 Roundtable, 2025-1082041C6 - TEI 2025 – Q. C.4 under s. 18.2(1) – excluded interest - (d)(ii)(A).
CRA confirms that funeral prepayments received in trust under the applicable Quebec Act are not assets of a funeral company
CRA confirmed that amounts received under a prearranged funeral services contract which are required to be held in trust under s. 21 of the Quebec Act respecting arrangements for funeral services and sepultures (the “LASFS”) by the recipient funeral-services corporation, are not considered assets of that corporation for the purposes of the definitions of small business corporation and qualified small business corporation share.
Neal Armstrong. Summary of 20 November 2025 External T.I. 2022-0940101E5 F under s. 248(1) – SBC.
Neal H. Armstrong editor and contributor